Interim Results

Goals Soccer Centres plc

Interim Results for the six months ended 30 June 2018

Goals Soccer Centres plc ("Goals" or the "Group") a leading operator of outdoor small-sided soccer centres with 49 sites, including three in California, USA, announces its interim results for the period ended 30 June 2018.

As announced previously in the trading update of 19 July 2018, Goals' performance has been impacted by the snow in Q1 2018 and further impacted in Q2 2018 by the re-scheduling of amateur 11-a-side games to midweek time slots when players would normally be playing 5-a-side.

H2 trading has started well and despite the challenging H1, Like-for-Like Sales (note 1) for the year to date are now positive. Trading has normalised and has returned to its positive trend following the anticipated slowdown during the World Cup, demonstrating clearly that where major investments have been made positive sales trends follow. We are therefore optimistic with respect to the trading outlook for the remainder of the year.

Statutory measures

Underlying performance

Statutory measures have been adjusted to reflect like-for-like ownership of Goals Soccer Centers Inc and exceptional costs of £2.7m relating to the impairment of an underperforming site and restructuring costs.

· Underlying Like-for-Like Sales (note 1) declined by 2.8% (2017: +1.6%) to £16.2m due to the impact of the challenging weather conditions in Q1 2018 and the knock-on impact in Q2 2018. The overall sales trend excluding the impact of adverse weather maintained its recent positive trend

· Underlying Group EBITDA (note 2) declined by 15.5% to £4.0m (2017: £4.7m)

· Underlying Profit Before Tax (note 3) reduced by 39.5% to £1.7m (2017: £2.9m)

· Exceptional costs of £2.7m (2017: nil) were incurred of which £2.2m was a non-cash asset impairment charge relating to the sale of a non-core centre

· Net debt at 30 June 2018 stood at £30.2m (2017: £28.6m) and current leverage of Net Debt/EBITDA is 3.19 times (2017: 2.7 times)

· The Group's balance sheet remains well capitalised with net assets of £97.2m (2017: £93.0m)

· No interim dividend is proposed.

The notes detailing underlying and adjusted performance measures can be found in pages 6 to 8 of this report.

Key highlights

· Goals continues to make progress through investing across its estate and where modernisation has taken place underlying improvement in performance is being achieved. There has been significant progress in 2018 in delivering our strategic plan:

o 260 out of our 460 arenas have been fully modernised and are delivering good returns at clubs where five or more arenas have been upgraded. Performance improved at clubs with between one and four upgraded arenas

o The planned £3.0m modernisation of a further 78 arenas is underway and is expected to be completed by early October 2018. Following this investment, 73% of the estate will have been upgraded and 39 of our 46 clubs in the UK will have 5 or more upgraded arenas.

· Continued expansion in the US with our Joint Venture partner City Football Group ("CFG"):

o US trading through our JV partnership continues to improve with total sales up 51.7% to $1.4m and the rollout of new clubs has been accelerated

o Third US club in Rancho Cucamonga, California was opened in January 2018

o Fourth US club in Covina, California is under construction and expected to open in November 2018.

· Michael Bolingbroke, who has been the Senior Independent Director since July 2016, was appointed Interim Non-Executive Chairman in February 2018 and took up the role of Non-Executive Chairman on 7 September 2018. 

· Our new CEO Andy Anson joined the Group at the end of April. Whilst Andy's immediate focus is to ensure the investment strategy is completed effectively, he is also undertaking a review of the business, the organisation and its operations, to refine and advance the strategy and to develop a plan to take the Group forward both in the UK and internationally, and to maximise returns for shareholders.

Andy Anson, CEO said:

"I am greatly encouraged by our performance in recent weeks which has seen the business fully recoup the financial effects of the extreme weather and moved us into positive like-for-like sales territory for the year to date.

As I carry out my review of the business I am delighted by the underlying performance of the sites where we have invested vindicating our strategy to upgrade our estate.

As we move forward I will be focusing on completing the investment strategy effectively, adapting where appropriate and delivering to shareholders the performance that Goals is capable of."

12th September 2018

Enquiries:

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Business Review

The Business

Goals was impacted by the challenging weather conditions in Q1 2018 which directly reduced Sales by £0.4m and Profit by £0.5m. This, combined with a further indirect impact on trading throughout Q2 2018 due to amateur 11-a-side games deferred from Q1 to dates in Q2, resulted in a decline in Like-for-Like Sales of 2.8%. The overall sales trend excluding the impact of adverse weather maintained its recent positive trend.

Trading in H2 has started well and despite the challenging H1, Like-for-Like Sales (note 1) for the year to date are now positive. Trading has normalised and has returned to its positive trend following the anticipated slowdown during the World Cup, demonstrating clearly that where major investments have been made positive sales trends follow.

I am pleased to announce that we have made progress with each of the strategic priorities, outlined below:

• Grow and innovate the UK core estate

• Develop new capabilities and gain competitive advantage

• International expansion of centres and brand

• Unlock underlying asset potential

We have made further progress in growing and innovating the UK estate with 260 of our 460 arenas already fully modernised. These continue to deliver good returns at clubs where five or more arenas have been upgraded. The planned investment of £3m in upgrading a further 78 arenas is underway and will be complete by early October 2018. This will increase the number of arenas modernised to 338 (73% of our estate) and 39 of our 46 clubs in the UK will have 5 or more upgraded arenas. Following this refurbishment the average pitch age will reduce to 3.2 years (2017: 4.1 years). We plan to continue to invest in our arenas in the coming years.

We continue to review the Return on Investment from the five "Clubhouse 2020" clubs modernised in 2017 and plan to recommence this project in due course when sufficient funding is available.

We continue to expand our range of services within the vibrant junior and youth markets with the launch of Goals Junior Academy at 4 clubs and a further 4 are planned for H2.

I am pleased to announce that we have entered into a 3-year sponsorship agreement with The Energy Check, one of the UK's leading energy consultancies. Goals will receive an annual fee in exchange for marketing rights across the Goals estate. Further sponsorship agreements are under discussion.

In conjunction with our JV partner CFG, we continue to make positive progress in the US. Our third club opened at Rancho Cucamonga in Los Angeles in January 2018 and our fourth US club in Covina, Los Angeles, is on schedule to open in November 2018. Sales at Goals Soccer Centers Inc increased by 51.7% to $1.4m (2017: $0.9m) and Like-for-Like Sales increased by 4.1% (2017: -4.5%). Initial trading at Pomona, which opened in 2017, and Rancho Cucamonga has been below our expectations as it is taking longer than planned to convert existing 11-a-side players to 5-a-side players. Marketing initiatives are planned to drive growth at these centres.

Board

Andy Anson, who previously held senior roles at Manchester United plc, The Walt Disney Company, and at Channel 4 in the UK, joined the Group as Chief Executive on 23 April 2018. Whilst Andy's focus initially is to execute and complete the modernisation of Goals' estate effectively, he is also undertaking a review of the Group and will develop a plan to fully realise the potential inherent value within the UK estate.

Bill Gow, Chief Financial Officer, has resigned from the Group to join his family business. A search for his successor has begun and Bill will continue in his role as Chief Financial Officer up until his successor is identified and has started. The Board would like to acknowledge and express its sincere gratitude to Bill for his invaluable and constructive contribution to the Board over the years.

Scott Lloyd resigned as Non-Executive Director during the period to focus on his full-time responsibilities as Chief Executive of the Lawn Tennis Association. The Board would like to thank Scott for his contribution and counsel during his time with Goals.

Jackie Ronson joined the Group as Non-Executive Director on 12 June 2018. Jackie is currently the Digital, CRM & Insights Director at EE, part of the BT Group plc. As a well-respected business leader and digital specialist, she brings a wealth of experience in consumer-facing industries to the Group, which will be important as the Group seeks to significantly improve its customer data and digital functions.

Current trading and Outlook

H2 trading has started well and despite the challenging H1, Like-for-Like Sales (note 1) for the year to date are now positive. Trading has normalised and has returned to its positive trend following the anticipated slowdown during the World Cup, demonstrating clearly that where major investments have been made positive sales trends follow. We are therefore optimistic with respect to the trading outlook for the remainder of the year.

Financial Review

Since the completion of the Joint Venture with CFG in July 2017, the financial results of Goals Soccer Centers Inc have been accounted for using the equity method of accounting. A number of Underlying measures and Total System Sales have been included within the Financial Review to give a like-for-like comparison.

Total Group Sales declined by 7.0% to £16.2m (2017: £17.4m) with Underlying Like-for-Like Sales declining by 2.8% (2017: +1.6%) to £16.2m due to the impact of the challenging weather conditions in Q1 2018 and the knock-on impact in Q2 2018. Like-for-Like Sales (note 1) excluding these weather-related events continued their recent positive trend.

Underlying Group EBITDA (note 2) declined by 15.5% to £4.0m (2017: £4.7m). This decline has been driven by the challenging weather conditions and an increase in UK overheads of £0.25m (2.4%) due to statutory increases in Living Wage and Business Rates.

UK depreciation and amortisation increased by 9.3% to £1.8m (2017: £1.6m) due to the increased level of capital expenditure over the last 2 years.

The decline in Underlying Group EBITDA (note 2) and increase in depreciation and amortisation resulted in a 28.6% decline in Underlying Operating Profit (note 6) to £2.2m (2017: £3.1m).

Financial expenses increased by 82.9% to £0.4m (2017: £0.2m) due to the increase in libor and Underlying EBITDA bank interest cover reduced to 18.5 times at 30 June 2018 (2017: 29.1 times). Net debt at 30 June 2018 stood at £30.2m (2017: £28.6m) and current leverage of Net Debt/EBITDA increased to 3.19 times (2017: 2.7 times) due to the decline in Underlying Group EBITDA (note 2). Our lenders, Bank of Scotland, agreed to amend the Net Debt/EBITDA covenant from 3.0x to 3.25x, to provide additional headroom in the quarterly tests until September 2018, after which the covenant will reduce back to 3.0x. The Group intends to reduce Net Debt/EBITDA throughout H2 2018.

Profit before tax before exceptional items declined by 38.2% to £1.6m (2017: £2.6m). Underlying Profit Before Tax (note 3) reduced by 39.5% to £1.7m (2017: £2.9m).

The Group incurred total exceptional costs of £2.7m (2017: nil). £2.2m of this was a non-cash asset impairment charge which relates to the sale of a non-core centre to a football club for use in a non-competing activity. It is envisaged that a significant element of the customer base will transfer to a nearby club and that the sale will result in an increase in profits. £0.5m was a cash charge relating to restructuring costs.

Earnings per share declined to (1.7p) (2017: 2.7p). Underlying earnings per share (note 4) declined by 38.7% to 1.9p (2017: 3.1p) principally due to the decline in Underlying Profit Before Tax (note 3) of 39.5%.

As working capital was managed tightly, Underlying free cash flow (note 5) increased by 22.0% to £2.5m (2017: £2.0m). The Group invested £1.8m (2017: £6.1m) in capital expenditure during the period all of which was invested in upgrading our mature centres. The Group invested £0.2m (2017: £0.2m) on software development and call centre systems during the year.

The Group's balance sheet remains well capitalised with net assets of £97.2m (2017: £93.0m). The Group has a long term non-amortising bank facility with Bank of Scotland of £42.5m which expires in July 2019. The directors plan to renew this facility during Q1 2019.

Dividend

The Board does not plan to declare an interim dividend for the period but does intend to recommence dividends when appropriate.

Michael Bolingbroke

Chairman

12 September 2018

Notes: Underlying and Adjusted Performance Measures

Management has presented the following performance measures as they are used throughout the Interim Results. Management believe that presentation of the Group's results in this way gives a better understanding of the Group's financial performance. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. This also facilitates comparison with prior periods to assess trends in financial performance more readily.

The Group applies judgement in identifying significant non-recurring items of income and expense that are recognised as exceptional or non-recurring to help provide an indication of the Group's underlying business. In determining whether an event or transaction is exceptional in nature, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

Exceptional and non-recurring items have been identified as:

- Impairment of a specific club which is to be sold and is therefore considered to be exceptional and of a non-recurring nature. Exceptional costs of this nature are permissible add backs for the purposes of bank covenant calculation.

- Restructuring costs in relation to Board and SMT structure changes are not considered to be recurring, in particular due to the timeframe of this restructure relative to the last restructure in 2016. Exceptional costs of this nature are permissible add backs for the purposes of bank covenant calculation.

- Share based payments ("SBP") are added back for the purposes of the underlying calculations as they are not considered to be core business costs and are a permissible add back for the purposes of bank covenant calculation.

The performance measures outlined below are not defined performance measures in IFRS. A reconciliation from these alternative performance measures to the nearest measure prepared in accordance with IFRS is presented below. The Group's definition of each performance measure may not be comparable with similarly titled performance measures and disclosures by other entities.

Note 1: Sales

In July 2017, the Group entered into a joint arrangement with City Football Group Limited ("CFG") for a new company ("Goals City US Ltd") created and jointly controlled by Goals and CFG. The previously wholly owned subsidiary Goals Soccer Centers Inc ("Goals US") is now owned by Goals City US Limited ("Goals City US" or "the JV") with both parties (CFG and Goals) having a 50% ownership interest.

Given the change in Group structure, it is necessary to introduce some alternative performance measures that allow a greater degree of comparability between years. A Total System Sales comparative has been included below. This comparative assumes no change in ownership and includes sales of all clubs in the UK and USA.

We have also included a calculation which shows LFL performance on a total systems basis. Management and investors find this information to be useful when reviewing the underlying performance of the Group, especially Goals US performance. Clubs that have been opened for less than 12 months are removed from the comparison which allows a greater degree of comparability between years as sales are generated by the same number of clubs.

A Like for like ("LFL") sales comparative has been calculated which assumes the current ownership structure was in place in H1 2017, allowing a greater degree of comparability between years.

Underlying and Adjusted Performance Measures (continued)

Note 2: Underlying EBITDA

Underlying EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation adjusted for the impact of the exceptional and non-recurring costs and the effects of equity-settled share-based payments as shown below. In addition, the previously wholly owned subsidiary Goals Soccer Centers Inc is now owned by the JV with both parties (CFG and Goals) having a 50% ownership interest. Therefore 2017 comparatives have been adjusted to reflect the current ownership structure.

EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider underlying EBITDA to be a useful measure of our operating performance because it approximates the underlying operating cash flow by eliminating depreciation and amortisation.

Note 3: Underlying Profit Before Tax

Underlying PBT is Profit Before Taxation adjusted for the impact of the exceptional and non-recurring costs and the effects of equity-settled share-based payments as shown below. In addition, the previously wholly owned subsidiary Goals Soccer Centers Inc is now owned by the JV with both parties (CFG and Goals) having a 50% ownership interest. Therefore 2017 comparatives have been adjusted to reflect the current ownership structure.

Underlying PBT is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider underlying PBT to be a useful measure of our profitability as it allows better analysis of the factors affecting the year's results compared to the prior period.

Underlying and Adjusted Performance Measures (continued)

Note 4: Underlying Earnings per Share

Underlying earnings per share is earnings per share adjusted for the net of tax impact of the exceptional and non-recurring costs as shown below.

Earnings per share is calculated by dividing the underlying earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year. For the period ended 30 June 2018 this was 75,215,060 (2017: 75,215,060).

Note 5: Underlying Free Cash Flow

Underlying free cash flow is net cash flow from operating activities adjusted for the cash impact of the exceptional and non-recurring costs as shown below. The previously wholly owned subsidiary Goals Soccer Centers Inc is now owned by the JV with both parties (CFG and Goals) having a 50% ownership interest. Therefore 2017 comparatives have been adjusted to reflect the current ownership structure.

Note 6: Underlying Operating Profit

Underlying Operating Profit is Operating Profit adjusted for the impact of the exceptional and non-recurring costs as shown below. In addition, the previously wholly owned subsidiary Goals Soccer Centers Inc is now owned by the JV with both parties (CFG and Goals) having a 50% ownership interest. Therefore 2017 comparatives have been adjusted to reflect the current ownership structure.

Underlying Operating Profit is a common measure used by investors and analysts to evaluate the operating financial performance of companies. We consider Underlying Operating Profit to be a useful measure of our operating performance.

Consolidated statement of comprehensive income

For the six months ended 30 June 2018

Consolidated statement of other comprehensive income

*Restated to include recycling of translation differences on disposal of foreign operations from other comprehensive income to contributions by and distributions to owners 

Consolidated statement of financial position

at 30 June 2018

Consolidated statement of cash flows

For the six months ended 30 June 2018

Consolidated statement of changes in equity

for the six months ended 30 June 2018

Consolidated statement of changes in equity

for the six months ended 30 June 2018 (continued)

*Restated to include recycling of translation differences on disposal of foreign operations from other comprehensive income to contributions by and distributions to owners

Notes to the Unaudited Interim Results

Goals Soccer Centres plc (the "Company") is a company domiciled in the United Kingdom.

1. Significant accounting policies

Basis of preparation

The financial information in this interim report comprises the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cashflows and accompanying notes. The financial information in this interim report has been prepared under the recognition and measurement requirements of IFRSs as adopted for use in the European Union but does not include all of the disclosures that would be required under those accounting standards. The Company has elected not to prepare the interim report in accordance with IAS 34 as adopted by the EU. The accounting policies adopted in the financial information are consistent with those expected to be adopted in the Company and Group's financial statements for the year ended 31 December 2018. The accounting policies are unchanged from those used in the Company and Group's financial statements for the year ended 31 December 2017, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2018 and that will be adopted in the annual financial statements for the year ended 31 December 2018.

The financial information in this interim report for the six months to 30 June 2018 and to 30 June 2017 has not been audited, but it has been reviewed by the Company and Group's auditor, whose report is set out on page 31. Any comparative figures for the year ended 31 December 2017 are extracted from the Group's audited financial statements for that period as filed with the Registrar of Companies. The financial information for the year ended 31 December 2017 does not constitute the Company and Group's financial statements for that period but is derived from them.

The Company and Group's statutory financial statements for the year ended 31 December 2017 have been filed with the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of an emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

New standards impacting the Group that will be adopted in the annual financial statements for the year ended 31 December 2018, and which have given rise to changes in the Group's accounting policies are:

- IFRS 9 Financial Instruments; and

- IFRS 15 Revenue from Contracts with Customers

Details of the impact these two standards have had are given below.

IFRS 9 Financial instruments

The standard simplifies the classification, recognition and measurement requirements for financial assets, financial liabilities and some contracts to buy or sell non-financial items, replacing IAS 39 Financial Instruments: Recognition and Measurement. The introduction of this new standard has not resulted in any change in accounting policies or had an impact on the results for the period ended 30 June 2018.

Classification - financial assets

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flows characteristics. Implementing this standard has not had a material impact on the accounting for trade receivables and loans. 

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Impairment - financial assets and contract assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward looking 'expected credit loss' (ECL) model. This will require considerable judgement about how changes in economic factors affects ECLs, which will be determined on a probability-weighted basis.

Under IFRS 9, loss allowances are measured on either of the following bases:

- 12-month ECLs: these are ECLs that return from possible default events within the 12 months after the reporting dates: and

- Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not.

Group cash and cash equivalents are held with banks which are rated "A" based on Standard & Poor's ratings. The Group considers that cash and cash equivalents have a low credit risk based on the external credit ratings of the counterparties.

Given that the Group has a good history of cash collection from debtors, bad debts have not been material and cash is held with "A" rated banks, impairment losses have not increased significantly since the adoption of this standard.

Classification - financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, under IAS 39 all fair value changes of liabilities designates as fair value through profit and loss ("FVTPL") are recognised in profit or loss, whereas under IFRS 9 these fair value changes are generally presented as follows:

- The amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in other comprehensive income ("OCI"); and

- The remaining amount of change in the fair value is presented in profit or loss.

The Group has not designated any financial liabilities at FVTPL and it has no current intention to do so.

IFRS 15 Revenue from Contracts with Customers

The standard specifies whether, how much and when revenue is recognised, using a principles based five-step model, replacing IAS 18 Revenue and IAS 11 Construction Contracts as well as various Interpretations previously issued by the IFRS Interpretations Committee. The Group has adopted the standard on a fully retrospective basis. The introduction of this new standard has not resulted in any change in accounting policies or had an impact on the results for the period ended 30 June 2018.

Sale of goods

The Group generates revenue from the sale of a number of goods off the back of customers utilising the Group's next generation football facilities. Secondary revenue lines include: hot and cold snacks; soft drink vending; confectionery vending; bar revenue and revenue from sales of football equipment. Revenue is recognised for secondary sales at the time the goods change hands, in line with IFRS 15 which stipulates that revenue will be recognised when a customer obtains control of the goods.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Rendering of services

The primary revenue stream of the Group is the utilisation of the football facilities including: revenue from leagues operated by the Group; revenue from customers who use the facilities to play on a non-league basis; corporate events; children's birthday parties; and children's coaching. Revenue is recognised for use of the football facilities when each game is complete. The introduction of IFRS 15 has had no significant impact on the recognition of revenue generated by the rendering of services.

Other income

The Group recognises revenue in respect of goods and services received under sponsorship and partnership agreements based on amounts invoiced in line with the terms of the contract. Revenue is recognised at the point of invoice as this signifies the completion of the performance obligations of the contract. The introduction of IFRS 15 has had no significant impact on the recognition of revenue generated by the sponsorship and partnership agreements in place during the period ended 30 June 2018.

Other standards

The following new standards, amendments and interpretations are effective for the first time in these interim statements but none have had a material effect on the Group and so have not been discussed in detail:

- Annual Improvements to IFRS 2014-2016 Cycle - Amendments to IFRS 1 and IAS 28

- Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS2)

- Transfers of Investment Property (Amendments to IAS 40)

- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

- IFRIC 22 Foreign Currency Transactions and Advance Consideration

- IFRIC 23 Uncertainty over Income Tax Treatments

- Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4)

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

New standards applicable for future period

IFRS 16 Leases

The Group is required to adopt IFRS 16 Leases from 1 January 2019. IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees effective for the Group's year ending 31 December 2019. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items which are not applicable to the Group. In addition, the standard introduces a depreciation charge for right-of-use assets and interest expense on lease liabilities.

Based on the initial assessment, the application of IFRS 16 is expected to have a significant effect on the financial statements, increasing the Group's recognised assets and liabilities and materially increasing Group operating profit whilst reducing Group Profit Before Tax. However the actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the Group's borrowing rate at 1 January 2019 and the composition of the Group's lease portfolio at that date.

The Group can either apply the standard using a retrospective approach or a modified retrospective approach with optional practical expedients. The Group will apply the election consistently to all of its leases. The initial assessment completed has used a modified retrospective approach and it is likely that this will be approach adopted by the Group.

Other new standards

A number of new standards, amendments to standards and interpretations are not yet effective for period ended 30 June 2018 or 31 December 2018 and have not been applied in preparing these interim results.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Going concern

The Group and Company meet their overall funding requirements through the capital market and their banking facility arrangements. The Group has a long term non-amortising bank facility with Bank of Scotland of £42.5m which expires in July 2019. Discussions have commenced with regards to renewing the facility.

During the period, Goals agreed with its lenders to amend its Net Debt/EBITDA covenant from 3.0x to 3.25x, to provide additional headroom in the quarterly tests in June and September 2018, after which the covenant will reduce back to 3.0x. This will allow the continuation of the arena and clubhouse modernisation projects into H2 2018.

Following a challenging first half of the year, as a result of inclement weather and its knock on effects, the directors have reassessed the company's funding position and requirements in light of the strategic capital investment programme in its estate, with reference to future trading projections and the terms and covenants of the borrowing facilities. The directors are confident that the company will operate within the terms and covenants of the existing facilities and will renew those facilities when their current term expires in July 2019. Accordingly, the directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing these interim results.

Basis of consolidation

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any other components of equity. Any resulting gain or loss is recognised in profit and loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

In July 2017, Goals entered into a strategic 50:50 Joint Venture with CFG, the global football group which owns a number of leading football clubs including Manchester City and New York City, to accelerate the growth of the Goals brand in North America. A separate entity, Goals City US Limited has been created as the Joint Venture vehicle. Goals Soccer Centers Inc, the previously wholly owned subsidiary, was disposed of by the Group at 31 July 2017, with share ownership transferring to Goals City US Limited. The transaction and associated costs resulted in a gain on sale of £2.8m, in the year to 31 December 2107, which was treated as exceptional.

Goals considered the different accounting policy choices available in respect of such transactions and has applied IFRS10 in accounting for the gain on disposal of the subsidiary.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Basis of consolidation (continued)

Interest in equity-accounted investees

The Group's interests in equity-accounted investees comprises of interest in a joint venture. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interest in the joint venture is accounted for using the equity method. It is initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and OCI of equity-accounted investee, until the date on which joint control ceases.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Revenue

Revenue represents the value of goods and services supplied to customers (net of applicable Value Added Tax). The Group's revenue comprises revenues from customers' utilising the Group's next generation football facilities and secondary revenue associated with this utilisation.

Revenue from utilisation of the football facilities includes: revenue from leagues operated by the Group; revenue from customers who use the facilities to play on a non-league basis; corporate events; children's birthday parties; and children's coaching. Revenue is recognised for use of the football facilities when each game is complete.

Secondary revenue includes: hot and cold snacks; soft drink vending; confectionery vending; bar revenue and revenue from sales of football equipment. Revenue is recognised for secondary sales at the time the goods change hands.

The Group recognises revenue in respect of goods and services received under sponsorship and partnership agreements based on amounts invoiced in line with the terms of the contract. Revenue is recognised at the point of invoice as this signifies the completion of the performance obligations of the contract.

Business segments

The Group operates primarily in the UK and its only trading activity is the operation of soccer centres. 

Exceptional items

Items which are material either because of their size or their nature, and which are non-recurring, are presented within their relevant consolidated income statement category, but highlighted through separate disclosure. The separate reporting of exceptional items helps provide a better picture of the Group's underlying performance. Items which are included within the exceptional category include:

- Costs associated with major restructuring programmes;

- Significant impairment charges in relation to goodwill, intangible or tangible assets;

- Other particularly significant or unusual items.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Taxation

The tax expense represents the sum of the current taxes payable and deferred tax.

The current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised or increased. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset to the extent that there is a legal right of offset.

Income tax in the interim period is calculated using the tax rate that would be applicable to expected total annual pre-tax results.

Intangible assets - goodwill

Goodwill on acquisitions represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities and contingent liabilities at the date of acquisition. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment. Impairment is first allocated to goodwill and then to other assets in the cash generating units on a pro-rata basis.

The value of Goodwill is reviewed at each balance sheet date to determine whether there is an indication of impairment. An impairment is recognised whenever the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of a cash generating unit is the greater of the value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the cash-generating unit.

Any impairment is recognised immediately in the statement of profit or loss and is not subsequently reversed.

Intangible assets - other

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Software development costs comprise of third party consultancy costs incurred in acquiring, bringing to use and developing the functionality of the Group's internal ERP system. Impairment testing is performed where an indication of impairment arises.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Amortisation

Amortisation is charged to the statement of profit and loss on a straight line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful life of the software development assets is ten years for the Smart Centre system and five years for the App and website.

Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition or construction of the asset. Borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalised during the period of construction. Depreciation is charged to the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Previous experience with regards to the wear and tear of pitches has been taken into consideration when deciding their estimated useful lives. For other assets, physical deterioration due to the passage of time and assets becoming obsolete due to changes in technology have been considered. The estimated useful lives are as follows:

The value of each centre is reviewed at each balance sheet date to determine whether there is an indication of impairment. An impairment is recognised whenever the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of a cash generating unit is the greater of the value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the cash-generating unit.

Assets under construction are transferred to the relevant asset category when they become operational and are depreciated from that date.

Dividends on shares presented within shareholders' funds

Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements.

Notes to the Unaudited Interim Results

1. Significant accounting policies (continued)

Earnings per share

The company presents basic and diluted earnings per share (EPS) data for ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares which comprise share options granted to employees.

Non-current receivables

Non-current receivables are amounts recognised under the VAT Capital Goods Scheme on capital expenditure incurred by the Group in line with its taxable use over a period of time.

AIM Rule 26

From 28 September 2018, all AIM companies must adopt a recognised code of corporate governance. The Board have concluded that the QCA Corporate Governance Code (2018) ("QCA") is the most appropriate code for the Group to follow. The Board have considered the principles set out in the QCA, in conjunction with the existing governance framework of the Group and are satisfied that the company's governance structures and practices align with the expectations set by the QCA Code.

2. Segmental reporting

IFRS 8 'Operating Segments' requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes to the Chief Operating Decision Maker, which is the Board. As each club has similar economic characteristics, provides the same services to similar customers and operates in a similar manner, the directors, therefore, consider that there is one reporting segment relating to the operation of outdoor soccer centres which includes the three (2017: two) clubs outside of the UK owned by the Joint Venture.

3. Tax

Corporation tax for the interim period is charged at 19% (June 2017: 19.5%), representing the estimated effective tax rate for the full financial year.

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the company's future current tax charge accordingly. The deferred tax liability at 30 June 2018 has been calculated based on these rates.

Notes to the Unaudited Interim Results

4. Dividends

No interim dividend is proposed for the period ended 30 June 2018 (2017: £nil).

5. Exceptional items - operating expenses

In June 2018, Goals agreed Heads of Terms to dispose of a non-core club to a professional football club for use in a non-competing activity. It is envisaged that a significant element of the existing customer base will transfer to a nearby club and that the sale will result in an increase in profits. The transaction values the club at £0.5m. The fair value less cost of disposal is therefore £0.5m, resulting in an impairment loss of £2.2m. Goals will continue to operate the club until May 2019.

In 2018, £0.5m of Board and Senior Management Team restructuring costs were incurred.

6. Exceptional items - other

In July 2017, Goals entered into a strategic 50:50 Joint Venture with CFG, the global football Group which owns a number of leading football clubs including Manchester City and New York City, to accelerate the growth of the Goals brand in North America. A separate entity, Goals City US Limited has been created as the Joint Venture vehicle. Goals Soccer Centers Inc, the previously wholly owned subsidiary, has been disposed of by the Group with share ownership transferring to Goals City US Limited. The transaction and associated costs has resulted in a gain on sale of £2.8m which has been treated as exceptional.

Notes to the Unaudited Interim Results

7. Earnings per share

Basic and diluted earnings per share

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year.

At each respective period end, the options are not in the money, therefore there is no dilutive element.

*Restated to include recycling of translation differences on disposal of foreign operations from other comprehensive income to contributions by and distributions to owners 

Notes to the Unaudited Interim Results

8. Property, plant and equipment

9. Intangible assets

Notes to the Unaudited Interim Results 

10. Other non-current receivables

11. Equity-accounted investment

On 25 July 2017, the Group entered into a joint arrangement with City Football Group Limited ("CFG") to accelerate the growth of the Goals brand in North America.

A new company - Goals City US Ltd - was created and is jointly controlled by Goals and CFG with both parties having a 50% ownership interest. The board has six members, three each from Goals and CFG. The Chairman has no casting vote.

Given that the arrangement is structured through a separate vehicle, the contractual agreement is such that both parties' liability is limited to their shareholding and the arrangement is not reliant on either party to generate revenue. The arrangement has been accounted for as a joint venture and has been consolidated on an equity-accounted basis.

Notes to the Unaudited Interim Results 

12. Deferred tax liability

Deferred tax assets and liabilities are attributable to the following:

13. Trade and other receivables

14. Trade and other payables

15. Disposal group held for sale

In June 2018, Goals agreed Heads of Terms to dispose of a non-core club to a professional football club for use in a non-competing activity. The disposal is in relation to the PP&E of the club, no other assets or liabilities will be disposed of at this time. It is envisaged that a significant element of the existing customer base of this club will transfer to a nearby club and that the sale will result in an increase in profits. Goals will continue to operate the club until May 2019 at which point all other assets and liabilities attributable to the club will be disposed of. The club PP&E is therefore classified as held for sale as at 30 June 2018, with the PP&E of the club impaired to reflect the fair value less cost of disposal.

Notes to the Unaudited Interim Results